Curious case of How CRED earns Money? Startup 201

What the heck is Cred???

When we hear the word Cred most of the people would be able to relate the word as "credibility", "creditworthy", "creditable" , "credible" &/or "Credit Card".

Well the founder of Freecharge after selling it in 2015 a certain someone who is a household name in the startup industry of India Mr. Kunal Shah decided that India needed a system where people are being rewarded for showing "credibility" by paying "Credit Card" bills by the people who are "creditable" to increase their "creditworthiness". this was the thought by which Cred was born after travelling quite a lot and by studying developed countries the thing that stood apart was that the systems, processes and businesses placed a high level of trust on individuals, users and employees was high where there were no attendants at a gas station to no one to attend you at supermarket queues for your checkout by using self checkout system. He tweeted while announcing the introduction of CRED on 1:00 pm · 26 Nov 2018.

“...people trusted the system because the system consistently rewarded good, trustworthy individuals. But back home, trustworthy individuals kept paying a price for the actions of others. “

All these years Credit Card companies and banks have charged the customers with exorbitant interest rates and 30 plus hidden charges even when a user pays one rupee less than the total bill cost.

When launching and asked Kunal told a reputed news agency that the business is a expecting a revenue opportunity of US$1-10 per user and they have partnered with over 1,000+ brand partners including the likes of Freshmenu, BookMyShow, AirBnB, Cure.fit, UrbanLadder, Bodycraft. About 35 associated banks are also listed on the site.

Now what the heck is "CRED mint"?

It is actually the latest way CRED is planning to earn money. CRED mint is the first investment-focused product that the startup has launched in partnership with P2P non-bank LiquiLoans, will allow users to ‘invest’ their savings in a capital pool, which will then be used to on-lend to other customers on the platform seeking personal loans. CRED mint is currently in early access and is a registered RBI approved p2p NBFC.

Launched : August 2021

Obviosuly when someone is paying you a 9% per Annum returns on your investment they are going to lend that money at higher interest to be able to make profit and give you the 4% more than what your usual run of the mill bank Fixed deposits pay you.

Introducing Cred Cash/Stah - Lender earns less than the lender

Just how CRED mint lets you invest money with a higher than usual interest rate CRED Cash in accordance with RBI regulated partners like IDFC First Bank allows you to lend money with pre-approved active credit line of up to Rs 5,00,000 with no forms, documents, phone calls or physical visits for usual than higher lending rate effectively allowing cred to earn money from the difference of borrowing and lending.

If you dont know, you dont know what CRED Pay is?

CRED Pay is feature is launched by CRED in partnership with Razorpay and Visa.

Cred users paid Rs 52,000 crore with credit cards for shopping in 2021 along with   nearly Rs 39,490 crore (nearly $5.5 billion) in 2021 while paying for utilities, shopping, food, travel etc and have accumulated the CRED Coins by which they can use to make payments to get a seamless checkout experience on all partner platforms. the way CRED makes money from this is Right off the bat when you consume offers of CRED partner to get 10 – 15 percent discounts on each partner they might be earning the bulk deal and affiliate programmes from the partners. Lastly, you can only use the credit card saved in your CRED app to make payments using CRED Pay so they earn with the bank too when you make payments.

If one notices the partners listed on the app are fairly new or are looking to make a mark in the large ecommerce market of India. CRED Pay gives them the access to its large number of member base who have a high LV and grow.

Now is the turn for CRED RentPay which is now CRED Max

The benefits of RentPay transcend just rewards on rent payment via credit card. Depending on your Credit Card billing cycle you can also get access to 45 to 50 days of credit. Given the dire need for liquidity amidst the lockdown, this is a much-appreciated advantage among the users whom the product has been pre-rolled to.

besides the big benefits of credit and CRED coins, tenants paying their rent via CRED RentPay may also earn up to 3.3% (depending on the card) extra points. That’s a nice bundle of three delightful benefits to make paying rent much less gloomy. 

CRED's Market Analysis

CRED's users are mostly the high end spenders who account for 1/3rd of total credit card spend in the country.

CRED's unique way of looking at things and growth strategy is to provide the convenience to the users and increase High Average Revenue per User (ARPU)

Most Indian banks have added around 1.37 million new credit cards in December'21, which is rise of 12% from November '21 with the total credit card users in india to 68.9 million, a 14.2% increase from 2020.

while these numbers are fascinating the astounding fact is average monthly spending on a credit card increased to about Rs 12,400 from Rs 10,700 earlier.

CRED Stats which will surprise you.

• CRED already has over 7.5 million+ members out of which 35% Premium credit card holders use CRED for their Credit Card Bill payment and it accounts for 25% of all bills paid in the country.
• During November'21, 40.24% of CRED members improved their credit scores, 200 Cr worth of hidden charges were detected using CRED Protect and 36 Cr worth of cashback was won by members for taking the right financial decisions.
• Marketing cost up by 289 percent to Rs 222 crore from Rs 57 crore in the corresponding year 2021.
• Employee Stock Ownership Plan (ESOP) payouts in the year doubled to Rs 44 crore from Rs 22 crore in 2021.
• CRED grew its employee base from 234 to 383 in the year, leading to a rise in salary costs to Rs 83 crore versus Rs 42 crore in 2021.

Elephant in the Room : How Cred Makes Money?

1. Product/Offer Listing Fees: CRED does not charge a fee from brands to list their products on the 'Discover' feature where the users can spend CRED coins to avail discounts as tweeted by Kunal Shah.
2. Rent Pay Commission: As discussed earlier, CRED charges a fee of approximately 1% to 1.7 % by allowing members to pay monthly rent with their credit cards- including large rent instalments, and EMI for an education loan.
3. Earning from Loan disbursal: CRED earns 1-2% commission from its lending partner IDC Bank on each loan disbursement, as stated by Entrackr in one of their article.

A note by Kunal on why CRED Doesnt make money.